Drawings of goods

The drawings of the goods, in a business, take place when the owner/partner of a business withdraws goods for their personal use. It’s hence called drawings as it reduces the capital invested by the owner(s). It’s also called the withdrawal account.

The drawings are generally made for cash or stock by the owner/partner and the relevant account is thus reduced causing the adjustment done on the owner/partner’s capital at the cost price.

Journal entry

The journal entry for the goods withdrawn for personal use will be as follows:

Explanation via rules

The drawings account is debited because it decreases the balance of the capital account. Whereas, the purchases account is credited as it causes a reduction in the purchases account.

As per the modern rules of accounting, we credit the decrease in assets, thus, the purchases account is credited. Whereas, the withdrawal account when increased is debited. Therefore, the drawing account is debited here.

As per the golden rules of accounting, “debit what comes in and credit what goes out.” Hence, the purchase account is credited. And, “if any expense or loss is incurred for the business, the expense or loss account shall be debited“. Thus, the drawing account is debited.